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EVIDENCE from AFRICA Stelios Michalopoulos Elias Papaioann NBER WORKING PAPER SERIES DIVIDE AND RULE OR THE RULE OF THE DIVIDED? EVIDENCE FROM AFRICA Stelios Michalopoulos Elias Papaioannou Working Paper 17184 http://www.nber.org/papers/w17184 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 June 2011 We would like to thank 4 referees and the Editor for their invaluable comments. We thank seminar participants at Dartmouth, Tufts, Oxford, Vienna, Brown, Harvard, NYU, the CEPR Development Economics Workshop, Stanford, UC-Berkeley, UC-Davis, IMF, the NBER Political Economy Meetings, the NBER Summer Institute Meetings in Economic Growth and Income Distribution and the Macroeconomy for valuable comments. We also benefited from discussions with Yannis Ioannides, Rafael La Porta, Antonio Ciccone, Rob Johnson, Raphael Frank, Jim Feyrer, Ross Levine, Avner Greif, Jeremiah Dittmar, David Weil, Sandip Sukhtankar, Quamrul Ashraf, Oded Galor, Ed Kutsoati, Pauline Grosjean, Enrico Perotti, Pedro Dal Bó, Nathan Nunn, Raquel Fernandez, Jim Robinson, and Enrico Spolaore. We are particularly thankful to Andy Zeitlin, Melissa Dell, Andei Shleifer, Nico Voigtländer, and Daron Acemoglu for detailed comments and useful suggestions. We also thank Nathan Nunn for providing the digitized version of Murdock’s Tribal Map of Africa. A Supplementary Appendix with additional sensitivity checks is available online at: http://www.dartmouth.edu/~elias/ and http://sites.google.com/site/steliosecon/. All errors are our sole responsibility. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2011 by Stelios Michalopoulos and Elias Papaioannou. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Divide and Rule or the Rule of the Divided? Evidence from Africa Stelios Michalopoulos and Elias Papaioannou NBER Working Paper No. 17184 June 2011 JEL No. N0,N17,O1,O11,O55 ABSTRACT We investigate jointly the importance of contemporary country-level institutional structures and local ethnic-specific pre-colonial institutions in shaping comparative regional development in Africa. We utilize information on the spatial distribution of African ethnicities before colonization and regional variation in contemporary economic performance, as proxied by satellite light density at night. We exploit the fact that political boundaries across the African landscape partitioned ethnic groups in different countries subjecting identical cultures to different country-level institutions. Our regression discontinuity estimates reveal that differences in countrywide institutional arrangements across the border do not explain differences in economic performance within ethnic groups. In contrast, we document a strong association between pre-colonial ethnic institutional traits and contemporary regional development. While this correlation does not necessarily identify a causal relationship, this result obtains conditional on country fixed-effects, controlling for other ethnic traits and when we focus on pairs of contiguous ethnic homelands. Stelios Michalopoulos Tufts University Department of Economics [email protected] Elias Papaioannou Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 and NBER [email protected] 1Introduction In recent years there has been a surge of empirical research on the determinants of African and more generally global underdevelopment. The predominant institutional view suggests that poorly performing national institutional structures, such as lack of constraints on the executive and poor property rights protection, as well as inefficient legal and court systems are the ultimate causes of underdevelopment (see Acemoglu, Johnson, and Robinson (2005) for a review). This body of research puts an emphasis on the impact of colonization on contemporary country-level institutions and in turn on economic development. Yet in the African context many downplay the importance of colonial and contemporary institutional structures. Recent works on weak and strong states emphasize the limited state capacity of most African states and their inability to provide public goods, collect taxes, and enforce contracts (Acemoglu (2005); Besley and Persson (2009, 2010)). The inability of African governments to broadcast power outside the capital cities has led many influential African scholars to highlight the role of pre- colonial ethnic-specific institutional and cultural traits. This body of research argues that the presence of the Europeans in Africa was (with some exceptions) quite limited both regarding timing and location. As a result of the negligible penetration of Europeans in the mainland and the poor network infrastructure that has endured after independence, it is local ethnic-level, rather than national institutional structures, that shape African development today (see Herbst (2000) for a summary of the arguments). In this paper we contribute to the literature on the determinants of African develop- ment tackling these two distinct, though interrelated, questions. First, do contemporaneous nationwide institutions affect economic performance across regions once we account for hard-to- observe ethnicity-specific traits, culture, and geography? Second, do pre-colonial institutional ethnic characteristics correlate with regional development once we consider country-specific attributes, like economic/institutional performance and national post-independence policies? In contrast to most previous works that have relied on cross-country data and methods, we tackle these questions exploiting both within-country and within-ethnicity regional variation across African ethnic regions. We utilize data from the pioneering work of Murdock (1959, 1967), who combining various sources has produced a map portraying the spatial distribution of ethnicities (Figure 1) as well as quantitative information on the economy, institutions, and cultural traits of several ethnic groups around colonization. To overcome the paucity of economic indicators across African ethnicities, we measure regional economic development at the ethnicity-country level using satellite images of light density at night which are available at a fine level of aggregation. After showing that light density correlates strongly with various measures of economic 1 development at different levels of aggregation (namely across African countries, administrative regions and villages within countries, as well as within ethnic areas across national bound- aries), we examine the impact of contemporary national institutions on economic performance. In line with cross-country studies, we find a positive correlation between rule of law (or control of corruption) and luminosity across African ethnic regions. Yet due to omitted variables and other potential sources of endogeneity this correlation does not imply a causal relationship. To isolate the one-way effect of contemporaneous institutions on regional development we ex- ploit differences in country-level institutional quality within ethnicities partitioned by national boundaries, as identified by intersecting Murdock’s ethnolinguistic map with the 2000 Digital Chart of the World (Figure 1). Figure 1: Ethnic Boundaries Figure 1: Ethnic and Country Boundaries The artificial design of African borders, which took place in European capitals in the late 19th century (mainly in the Berlin Conference in 1884 5 and subsequent treaties in the 1890), − well before independence and when Europeans had hardly settled in the regions whose borders were designing, offers a nice (quasi)-experimental setting to address this question.1 The drawing of political boundaries partitioned in the eve of African independence more than 200 ethnic groups across different countries. Taking advantage of this historical accident, we compare economic performance in regions belonging to the historical homeland of the same ethnic group, but subject to different contemporary national institutions. The regression discontinuity (RD) 1 There is no ambiguity among African scholars and historians that almost all African borders were artificially drawn. See Asiwaju (1985) for examples and Michalopoulos and Papaioannou (2011) for additional references on the drawing of borders in Africa. 2 approach allows us to account for differences in geography, the disease environment, and other ecological features. Moreover, by comparing development across border regions that belong to the historical homeland of the same ethnic group (see Figures 2 2 for examples), allows us − to also neutralize biases coming from cultural and other ethnic-specificdifferences. Our results show that there is no systematic relationship between countrywide differences in institutions and regional economic performance within partitioned ethnicities in Africa. Figure 2 Figure 2 Figure 2 Figure 2 We then turn our focus on the economic impact of pre-colonial ethnic institutions. Our analysis shows that political complexity before the advent of European colonizers correlates significantly with contemporary development, even when we account for national policies and other country-specific features. This correlation does not necessarily
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